In developed countries tariffs on raw materials tend to be
|a. highest of all|
b. higher than on manufactured goods
c. equal to tariffs on manufactured goods
d. lower than on manufactured goods
The Correct Answer Is:
- d. lower than on manufactured goods
In developed countries, tariffs on raw materials tend to be lower than on manufactured goods, and this pattern is influenced by various economic and strategic considerations.
To understand this, we must delve into the dynamics of international trade, economic development, and the role of tariffs. This response will provide an in-depth explanation of why option (d) is the correct answer and why the other options (a, b, and c) are not.
Why Option (d) Is Correct: Tariffs on Raw Materials Are Lower Than on Manufactured Goods
Tariffs are taxes imposed by a government on imported goods, and they serve various purposes, including generating revenue, protecting domestic industries, and fostering economic growth. The difference in tariff rates between raw materials and manufactured goods in developed countries can be attributed to the following reasons:
1. Economic Growth and Industrialization:
Developed countries, characterized by advanced industrial and manufacturing sectors, often rely on raw materials as essential inputs for their industries. They need a consistent supply of raw materials to fuel their economic growth. Imposing high tariffs on raw materials could lead to increased production costs, which would, in turn, negatively impact the competitiveness of their domestic industries.
2. Global Supply Chains:
Modern manufacturing relies heavily on global supply chains, where raw materials are sourced from various countries and then transformed into finished products. Imposing high tariffs on raw materials could disrupt these supply chains, increasing the cost and complexity of production. This, in turn, would make it more challenging for developed countries to maintain their manufacturing competitiveness.
3. Export Competitiveness:
Developed countries often have a surplus of manufactured goods that they wish to export. By keeping tariffs on raw materials lower, they make it more affordable for their domestic manufacturers to acquire the necessary inputs, ensuring a competitive edge in international markets. This helps maintain a trade surplus, which is a key component of their economic stability.
4. International Trade Agreements:
Developed countries are often signatories to various international trade agreements and organizations, such as the World Trade Organization (WTO) and regional trade agreements. These agreements often require members to reduce tariffs on certain goods, particularly raw materials, to promote global trade. Non-compliance with these agreements could result in disputes and sanctions.
5. Protecting Downstream Industries:
While tariffs on raw materials are lower, tariffs on manufactured goods can be higher to protect domestic industries. By imposing higher tariffs on finished products, developed countries aim to shield their own manufacturers from foreign competition. This can be seen as a strategy to encourage the growth of their manufacturing sector and the creation of jobs.
6. Economic Efficiency:
In an economically developed country, policymakers often prioritize economic efficiency. Maintaining low tariffs on raw materials can help promote this efficiency by ensuring that manufacturers have access to cost-effective inputs. Economic efficiency leads to lower costs, increased productivity, and a stronger overall economy.
In summary, developed countries maintain lower tariffs on raw materials compared to manufactured goods because it supports their industrial growth, fosters economic efficiency, enables them to participate in global supply chains, and promotes export competitiveness. These lower tariffs align with their strategic economic objectives and international trade agreements.
Why Other Options Are Incorrect:
a. Highest of all:
This option is incorrect because imposing the highest tariffs on raw materials would be counterproductive for developed countries. It would significantly increase the cost of production and harm their manufacturing industries, which often heavily rely on these inputs.
b. Higher than on manufactured goods:
This option is also incorrect because it goes against the general economic and trade policy of developed countries. Imposing higher tariffs on raw materials would disrupt their supply chains, reduce manufacturing competitiveness, and potentially lead to economic inefficiencies.
c. Equal to tariffs on manufactured goods:
This option is incorrect because maintaining equal tariffs on raw materials and manufactured goods would not align with the strategic interests and economic priorities of developed countries. As discussed earlier, they have reasons to keep tariffs on raw materials lower.
In conclusion, developed countries tend to have lower tariffs on raw materials compared to manufactured goods due to their reliance on these inputs, the need to participate in global supply chains, their export competitiveness, international trade agreements, and their goal of fostering economic efficiency.
This approach is in line with their broader economic and trade policies, which prioritize the growth and competitiveness of their domestic industries. Imposing high tariffs on raw materials would not only be counterproductive but also inconsistent with their economic objectives and international commitments.